(2nd LD) Kakao to acquire S. Korea's top music streaming provider

SEOUL, Jan. 11 (Yonhap) -- South Korea's top mobile messenger operator Kakao Corp. said Monday it will take over a controlling stake in LOEN Entertainment Inc., expanding its business scope to cover music streaming.

Under the plan, Kakao will purchase a 76.4 percent stake in the country's leading provider of music streaming and download service for 1.87 trillion won (US$1.54 billion).

The figure marks the largest amount ever invested by Kakao in a single project, industry sources said.

KakaoTalk, South Korea's most favored mobile messenger, is used by around 37 million users in the country with a population of 50 million.

LOEN operates the music streaming service MelOn that has 28 million local users.

"Music is one of the most loved content genres in the mobile era. It is also incredibly powerful in that one song can set trends for an entire generation and highly influence global pop culture," said Jimmy Rim, CEO of Kakao.

The mobile messenger operator said it seeks to raise 750 billion won through issuing new stocks to Star Invest Holdings Limited, LOEN's former major shareholder. It will also utilize its cash and plans to seek outside investments if necessary.

The new shares will be issued on March 14 with a price tag of 109,121 won.

Kakao started from a merger between South Korea's online portal operator Daum Communications Corp. and then-Kakao Corp. in 2014. Since then, Kakao has been rolling out various services on the back of its strong local users, including mobile wallets and taxi services.

Kakao said its mobile platform and LOEN's content can generate new business opportunities, adding that it aims to pave ways for local musicians to tap overseas markets.

The company's existing music service, KakaoMusic, operated in cooperation with Bugs Corp., will be maintained for the time being. KakaoMusic focuses on sharing music on social network platforms.

Industry watchers said the merger also came in line with Kakao's efforts to push what it calls the on-demand strategy, which provides customized services to its users anytime.

Shares of LOEN closed 5.47 percent higher at 82,900 won on the secondary bourse Monday, while Kakao edged down 0.43 percent to 114,700 won. The KOSDAQ market lost 1.11 percent. The report was announced after the stock market opened Monday.

LOEN Entertainment also holds various top-name stars under its wing, including singer-songwriter IU.

The logo of MelOn, the music service of LOEN Entertainment Inc. (Yonhap)